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Light Sweet Depression
Updated – (Chalabi) at end of post
Light Sweet Crude Oil was slightly below $44 per barrel this morning. There is currently nearly no reserve capacity left on this planet and now this:
Iraq Stops South Oil Output After Militia Threat
BAGHDAD, Iraq (Reuters) Mon Aug 9, 2004 12:48 PM ET – Iraq stopped oil production from its southern oil fields Monday after a Shi’ite Muslim uprising led by radical cleric Moqtada al-Sadr spread to the oil sector for the first time since the late-June handover of power to Iraqi authorities.
An Iraqi oil official said militiamen from Sadr’s Mehdi Army threatened to sabotage operations by the state Southern Oil Company, based in Basra city.
“Pumping from the southern oil fields to storage tanks at Basra was stopped today after threats made by Al-Sadr,” the official told Reuters. “It will remain stopped until the threat is over.”
…
Iraq’s southern fields have been supplying the Gulf Basra terminal with about 1.9 million barrels a day. Exports from Iraq’s northern oil fields have operated only sporadically since the U.S. occupation last year and remain closed after a series of attacks on the main northern export pipeline from the Kirkuk fields.
Now it will be proven by Al Sadr and others that oil is the most effective weapon against the US. Others will recognize this too (Venezuelan recall referendum?). Can anyone expect this threat to end anytime soon?
What may follow now economically? Here are my € 0.02:
– Light Sweet Crude Oil: (far) above $50/bl
– Fed: will not hike rates tomorrow
– Treasuries: will rally
– Stocks: will fall
– US economy: will grind to a halt
– Prices: will rise fast
– US$: down (maybe after a short rally)
– Worst case: stagnation and inflation, given some time developing into hyperinflation, loss of confidence in the US$, US economy crashing into a deflationary depression, others follow.
CHOAM Economic Analysis of Materiel Flow Patterns says:
Melange is the financial crux of CHOAM activities. Without this spice, Bene Gesserit Reverend Mothers could not perform feats of observation and human control, Guild Navigators could not see safe pathways across space, and billions of Imerial citizens would die of addictive withdrawal. Any simpleton knows that such dependence upon a single commodity leads to abuse. We are all at risk.
The Preacher at Arrakeen minds
This is the fallacy of power: ultimately it is effective only in an absolute, a limited universe. But the basic lesson of our relativistic universe is that things change. Any power must always meet a greater power.
Update – 3:58 PM
The stop of the Iraqi oil flowing to Basra seems to have a more sinister background than threats by Al Sadr. As Nemo pointed out in the last open thread, Chalabi is pulling the strings.
When NeoCon darling Achmed Chalabi came back to Iraq after the invasion, a gang of US trained thugs guarded him. Later these men were “integrated” into the security forces of ERINYS, the British company that has the contract to guard all Iraqi oil installations. ERINYS is connected with Chalabis INC organization and reportedly Chalabi was paid $2 million for his helpful recommendations on the contract. Chalabis nephew Salem was hired as a lawyer by ERINYS as were thousands of foreign “security trainer” mercenaries.
Yesterday the CIA asset Prime Minister Iyad Allawi issued arrest warrants for NeoCon asset Chalabi and for his nephew. Today the Flow Of Spice was stopped because militiamen from Sadr’s Mehdi Army threatened to sabotage operations by the state Southern Oil Company.
Maybe the guards of the Iraqi oil assets could step up the security again and hinder sabotage, if … and if … and if… .
Wolfowitz and Negroponte must be negotiating at each others throat by now, while Secretary John Snow prepares to distribute Prozac.
If prices for oil do go so high, I’m afraid that nations like the U.S. will push for nuclear and coal because they are already there, so to say, as far as infrastructure.
the problems with these two are already known, and they will bring ecological blowback of their own.
on the other hand, smart people who are also rich can use this opportunity to re-align some energy consumption to renewable and zero carbon forms because, as the price of oil rises, these technologies will be more attractive because they’ll be more affordable, AND they have a lot of support among better educated people who also happen to vote more in the U.S.
on the other hand, I was talking to a guy today about health care as a human right etc. This started as a talk about him wanting to be rich, because he could help a lot of people. I said, maybe people don’t want charity, don’t want to be helped. Maybe they want to be paid a decent wage, maybe they deserve to be paid enough so that someone doesn’t have to deign to shower them with charity. This veered into a discussion of other western democracies, and health care as a human right in rich nations.
He just couldn’t quite agree that health should be considered a human right, or, in other words, that people, no matter how poor, should be able to get decent health care in one of the richest nations in the world.
I asked about “life, liberty and the pursuit of happiness,” so important to Americans, supposedly. I asked…isn’t health care sometimes necessary for life? Are some Americans, then, more equal than others, and deserve health care, just because they were born to a rich parent, while a poor child was not?
He just wasn’t sure.
But, he thought that gas should not be taxed. I said, but the world is facing the peak of oil production…why should gas be cheap?
He said, because people need to be able to drive to work in America…that’s just the way our nation is set up.
anyway, we talked about a few other things, he made an exit after shaking my hand, like “good match,” (I felt like I should jump a net), and I thought…
so, another American who thinks that having cheap gas is more important for America than health care.
I didn’t get a chance to ask him what sick people were supposed to do when they had cheap gas but couldn’t go to work because they were ill and couldn’t afford a dr’s appt or medicine or couldn’t get into a hospital, or we too proud and ashamed to ask for “charity.”
Too many Americans are so fucked up.
It’s sad to know that his thinking (selfish, of course, punitive for people who may be totally innocent, like poor children, but totally focused on the ease of his life and the idea that money is the supreme value…..it’s just really, really fucked up.
Posted by: fauxreal | Aug 9 2004 23:15 utc | 25
Bernhard: Funny, as soon as I read about Sadr ordering to stop the flow of oil, I thought of Muad’Dib “He who can destroys something controls it.”
Speaking of Chalabi, it’s worth noting he’s quietly in Tehran now.
“I am rooting for $100 dollars a barrel.”
Koreyel, count me in. It’s time enough mankind comes to terms with a certain Mr. Malthus.
“Receding glaciers lift the curtain on new, untouched land every year, opening acres of rugged terrain for off-trail hiking and scrambling”
Hmmm, does this idiot really say it’s a good thing to have melting glaciers because it makes more areas for hiking, or am I just dumb?
That said, I don’t think 140$ a barrel should entirely end up in some Wahhabi lunatic’s hands, be it Fahd or Usama. Thankfully Europe taxes oil heavily so most of what the inane European driver pays *could* be put to good use if European govts had any sense. Namely, using the entire oil tax to subsidise renewable energy and assorted R / D. The irony is that if solar power was more developed, the Gulf area could still benefit from it since it’s one of the sunnier place on Earth. But for that the Saudis would need more enlightened rulers than the West had for the last decades.
“coal gassification, liquification”
The key question shouldn’t be if it’s doable but if this energy pollutes less. And I have doubts about anything based on coal, so far.
Teuton: “cheap mobility” indeed! That’s the core of the problem. Imhom the current level of mobility in Western societies is simply not sustainable, at least not when it concerns hundreds of millions, and soon billions, if India and China have their way. But as I said, this won’t be a problem for a long time; if oil doesn’t do it, depleted food and water reserves will. As far as I’m concerned, the only absolutely sure thing is that this century will end with less humans alive than it began with.
jdp: Peak oil doesn’t mean the reserves are nearly over, it just means they’re half-empty and you can’t get more oil than what you pump. All in all, it also means that the real troubles will come in several years, not in 2005, because the production will still be ok for years before really going down.
Coming economic troubles: I don’t think things will be rosy in Europe, indeed, but it won’t be jurt as much as the US, at least at the beginning. Then, it will depend on the global economy actually surviving at all, and on the Euro becoming quickly enough on par with dollar, or even a more important currency than dollar; if it happens not too late, European economy may rise again and not totally sink.
Iran: that’s the wild card right now, imho. And frankly, Japan would be foolish to leave for Lybia; better even try to deal with both countries. US and Japan off Iran would basically leave the market to Europe and China, and I don’t think it’s wise from Japan’s or US’s point of view.
There’s also the problem of the Iranian nuke. Well, they said before that they have some nasty reprisals if Israel or the US tries to destroy their infrastructure. And the more I think about it, the more I think one of the components is to dump the dollar for their oil. In fact, if Israel tries to radi Iran’s nuclear installations, that could well piss off the entire Arab world and bring them close, for once, which would mean that all Arab countries – followed by a pretty angry Chavez – to dump dollar and shift to Euros or any combination of their liking. Breaking the US economy would also wreck Israel’s economy, which is quite a big incentive for them.
“government expenses for broken chariots, worn-out horses, breast-plates and helmets, bows and arrows, spears and shields, protective mantles, draught-oxen and heavy wagons”
Thankfully, the Bush system means that the troops, not the State, have to pay for their own water and body armor.
“him wanting to be rich, because he could help a lot of people”
Frankly, I have trouble considering the guy is really honest; this smells of the highest hypocrisy from some greedy person. But since you know him, I’ll gladly be proven wrong.
Posted by: CluelessJoe | Aug 10 2004 12:06 utc | 36
We all often tend to think of hydrocarbons as fuel for machines, and as mainly used for personal transport. I close my eyes and I see a rich suburbanite slipping into a SUV to go and buy a carton of milk. Or I see happy vacationers waiting to fly off to some boring tourist hotel. I see people who live what is today called ‘non-sustainable’ life-styles, and snittily I can judge them to be greedy, grasping, unaware, etc. (While myself driving a car to get to work, etc. so I don’t make that judgment..)
When we enlarge our vision a little bit, we see that ‘oil’ is used to produce much of the stuff and things we buy – from medecines to computers to plastic sandals. We can realise that replacements may be cumbersome, expensive, difficult, or even impossible in some cases. Yet, we can imagine going back in time, and living like, say, my grandfather did in in 1920. He had a bicycle and a cello. His wife cooked on a coal stove. Their clothes were high quality – wool and cotton. Etc. Etc.
And then we look around a little more. Some time ago I read two articles that attempted to figure the energy cost of buildings, independently of human activity (manufacturing, cooking, etc.) taking place inside them: taking buildings as shells that are to contain humans and provide them with the necessary confort needed for yet other activities. Producing the materials needed (even a wood chalet means using an electric saw..); assembling them (including roads for access to the new buildings); maintaining the buildings, repairing them, cooling and heating them, and providing water all day (including hot on tap) and light for part of the night inside them were the sorts of tasks included. The energy source used is varied, of course, but the cost in fossil fuels (this was in Switzerland, so coal is practically non-existent) is rather large. I would not like to put a number on it – it would be meaningless without the details (e.g. climate, method of calculation, etc.). Large. My own take was that the ‘doubling up’ procedure, known here as a possible measure for times of catastrophe (half the buildings are left empty and the humans pack into the remainder) makes perfect sense.
But we tend to think of buildings as immovable structures, just there, part of our man-made, constructed world. We take them for granted.
Finally (after we have considered transport some more, and skipped war, just for the happy oblivious ease of it, set aside industry for another day…) our eyes turn down to our plates. There is the legendary steak (cattle which is fed corn which was grown with the use of tractors, fertilizer, water pumps; beef goes to slaughter houses, travels in trucks, is processed, packed, etc. etc.), the portion of fancy spiced frozen potatoes, thawed and fried (fill it in..) and some snappy green beans.
Estimates as to how much energy is provided by fossil fuels to agriculture vary, from one calorie of fuel producing on calorie of food, to 10 calories producing one edible calorie, depending on a whole host of variables, including the mind-set of the calculator.
Our vision of the golden apple quietly growing on the tree, with sun and rain coming from the heavens, and the rustic farmer waiting till it will gloriously fall into his lap, or charmingly begs to be picked, ready to be eaten, is a myth.
One good article (short and readable) on oil and food:
Link
The upshot is that the vital commodity is not money but energy itself.
Posted by: Blackie | Aug 10 2004 17:01 utc | 46
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